The U.S. Court of Appeals for the D.C. Circuit has backed the FCC's decision that Northstar Wireless and SNR Wireless were under Dish's control when they successfully bid $13 billion in wireless licenses in the AWS-3 auction, and thus did not qualify for the over $3 billion in bidding discounts that brought the price down to $10 billion.

The two companies teamed with Dish to acquire $10 billion worth of spectrum licenses in the auction. But the FCC subsequently concluded that Dish's majority financial interest in the companies were controlling interests that should be attributable to Dish, which meant the companies were ineligible for the $1.9 billion (Northstar) and $1.4 billion (SNR Wireless) bidding credits they had applied for.

Dish had put up most of the $10 billion.

The companies appealed the FCC decision to the D.C. Circuit, which in August 2017 upheld the finding that Dish exercised de facto control, but also held that the FCC, under then chair Tom Wheeler, failed to notify the companies that if the FCC found they did not qualify for the credits, worth billions of dollars, the FCC would not give them a chance to cure that problem and instructed the FCC to correct.

The FCC provided that chance to cure the problem, but still ruled the subsequent new filings did not change its conclusion that Dish was both he biggest investor and in de facto control of Northstar and SNR and so did not deserve the designated entity bidding credit.

Also: Dish Makes Case for AWS-3 Bids

The companies then challenged that 2020 decision (under Republican Chairman Ajit Pai) in the D.C. circuit, saying the FCC "flouted this court’s orders in SNR Wireless by not working closely enough with them to reduce Dish’s control, wrongfully found them to be controlled by Dish, and penalized them without fair notice."

Wrong, wrong and wrong, the court said Tuesday in upholding the FCC. It said the FCC had provided the requisite opportunity to cure and "reasonably applied its precedent to the companies and gave them fair notice of the legal standards that it would apply in analyzing their claims to be very small companies," claims the FCC rejected. ■

As expected, the FCC has concluded that SNR Wireless LicenseCo and Northstar Wireless still don't get the bidding credits they sought in the 2015 AWS-3 auction.

The two companies teamed with Dish Network to acquire $10 billion worth of spectrum licenses in the AWS-3 auction. But the FCC subsequently concluded that Dish's majority financial interest in the companies were controlling interests that should be attributable to Dish, which meant the companies were ineligible for the $1.9 billion (Northstar) and $1.4 billion (SNR Wireless) bidding credits they had applied for.

Dish had put up most of the $10 billion.

Related: MMTC, NABOB Say FCC Should Help Northstar, SNR Cure DE Applications

The companies appealed the decision in court.

That federal court in August 2017 upheld the finding that Dish exercised de facto control, but also held that the FCC, under then chair Tom Wheeler, failed to notify the companies that if the FCC found they did not qualify for the credits, worth billions of dollars, the FCC would not give them a chance to cure that problem and instructed the FCC to correct.

Related: Dish Makes Case for AWS-3 Bids

The FCC under new management--Chairman Ajit Pai--and in response to the court remand, in January told the companies to renegotiate with Dish and other parties and file the necessary documents to show they now qualify for the credit.

The companies revised the agreements, but the FCC has now concluded that upon reviewing those, Dish continues to exercise de facto control, and that neither company--nor Dish as the de facto controller-- qualifies for the $3.3 billion.

They have already defaulted on the licenses they sought bidding credits for--they paid full price for others--so they won't owe the $3.3 billion, though they may be subject to default payments when the licenses are re-auctioned.

Already not flush with cash as they attempt to bootstrap a nationwide 5G wireless network, Dish Network and company Chairman Charlie Ergen received some unhappy news from the FCC earlier this week. 

As outlined by Fox Business, FCC commissioners unanimously ruled that Dish improperly received a $3.3 billion government discount on a winning bid for $12 billion worth of wireless spectrum purchased at auction in 2015.

The discount was tied to an FCC program aimed at helping small businesses obtain spectrum. Ergen claimed that winning bidder Northstar, which he also oversees, is a separate company from Dish. 

The government isn’t buying that claim. The FCC said Dish owns 85% of Northstar. The agency has fined Ergen $500 million, and its forcing Dish/Northstar to forfeit $3.3 billion worth of the spectrum.

And if the FCC can’t recoup the full $3.3 billion after auction, Dish and Ergen would have to make up the difference out of their own pockets. 

"There is no doubt that Charlie will be paying something," an unnamed telecom executive told Fox Business. "The government will auction this off and there is demand, but there are other auctions which means it will probably not go for $3 billion.”

Certainly, this is a bad time for Ergen to have to pay a speeding ticket. 

Dish was the facilitating third party in T-Mobile’s $40 billion purchase of Sprint earlier this year. The satellite TV company, which also operates virtual MVPD Sling TV, is now on the hook to build out a nationwide 5G network, replacing wireless competition lost through the consolidation. 

As part of that complex T-Mobile/Sprint arrangement, Dish shelled out $1.4 billion for pre-paid wireless service Boost Mobile over the summer. 

According to Ergen, meanwhile, Dish will “inevitably” merge its satellite TV operations with DirecTV, after AT&T sells the latter to private equity. 

A federal court has upheld the FCC's determination that Dish had de facto control over AWS-3 winning bidders SNR and Northstar.

The FCC denied designated entity (DE) bidding credits to the companies--some $3.3 billion worth--which would have lowered the bid to $10 billion, after which the companies said it could not pay for all of the licenses, paying full price for some and turning back others, which the FCC allowed them to do.

The AWS-3 auction raised over $40 billion and paid for the FirstNet broadband emergency network in the process.

"Under the totality of the circumstances, we believe that the FCC acted reasonably and consistently with   its Wireless Bureau’s decisions when it held that DISH had de facto control over SNR and Northstar," wrote Judge Cornelia Pillard in the decision, which was rendered by a three-judge panel comprising Judges Pillard and Janice Rogers Brown and senior Circuit Judge Stephen F. Williams.

But the U.S. Court of Appeals for the District of Columbia panel also found that the FCC did not give those companies sufficient notice that, if their relationship cost them the credits, the FCC would not give them a change to cure that de facto control.

"Because the FCC did not give clear notice that such an opportunity would be denied, we conclude that an opportunity for petitioner to renegotiate their agreements with DISH provides the appropriate remedy here," the court said.

The court remanded the matter back to the FCC saying it needed to give those companies a chance to negotiate a "cure" of that control, which presumably could mean reinstating the credits.

Dish is ready to pitch in. ""We are pleased this has been referred back to the FCC," the company said in a statement. "We look forward, along with NorthStar and SNR, to working with the FCC to address any concerns they may have.”

The FCC had argued against providing a cure, saying it would disincentivize compliance since companies could just seek the credit and haggle post-auction. The court disagreed, saying "nothing in our decision requires the FCC to permit a cure. That choice lies with the FCC. But if the very opportunity to seek one is to be foreclosed, applicants must have clear, advance notice to that effect."

“Today’s D.C. Circuit decision explains in painstaking detail why the Commission reasonably determined that DISH abused a program designed to help small businesses," said Tina Pelkey, press secretary to FCC Chairman Ajit Pai. "This is an important victory for American taxpayers. In the AWS-3 auction, the two entities claiming over $3 billion in taxpayer-funded discounts were not independent small businesses, but rather under the control of DISH. Going forward, we need to make sure that this program is available only to legitimate small businesses that actually control their own destinies.” 

Dish had put up most of the money for the two to bid $10 billion on wireless spectrum licenses in the AWS-3 wireless spectrum auction. The licenses were actually worth $13.3 billion, but SNR and Northstar sought designated entity bidding credits as diverse owners. The FCC denied that credit--after they had already bid--due to Dish's investment and plans to run the network. 

The court signaled that if the companies extricate themselves sufficiently from Dish to the FCC's satisfaction, they could qualify for the $3.3 billion break and reclaim those licenses. If not, the FCC will have to re-auction that $3.3 billion worth of spectrum.

Harold Feld of Public Knowledge, which filed an amicus brief in support of essentially what the court concluded--that the FCC had the authority to deny the credits, but should have given Dish and the companies the chance to cure the problem--was, not surprisingly, pleased with the decision.

"I'm pleased the court agreed with our analysis," Feld told Multichannel News/B&C. "As we noted in our amicus, the DE credit put licenses in the hands of competitors, and into constituted the single largest win of FCC licenses by minority-owned businesses (both SNR and Northstar are minority owned as defined by the Commission).

"Second, we hope that the FCC will move expeditiously to negotiate with DISH to provide adequate independence for the DEs and put the spectrum into productive use -- especially on behalf of a potential new entrant into terrestrial wireless. Whatever personal feelings then-Commissioner Pai and others may have expressed about DISH's conduct previously, the court has made it clear that DISH is entitled to the opportunity to cure the defects the FCC found in its DE agreements. To the extent people feel DISH unfairly exploited a loophole, the FCC has long since closed the loophole. It's time to put this matter to rest and get the spectrum out as quickly as possible."